Replies to This Discussion

Permalink Reply by The_Baron on December 12, 2008 at 6:11

The perferations in the well would determine the location of the production.

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Permalink Reply by Dion Warr, CPL on December 15, 2008 at 2:46

Jim:

I love using stratigraphic provisions defined just the way you descibed them. The problems with this case are twofold: (1) linda didn't have a ready-made well at the time in which those intervals were defined by a geologist, and (2) as kb, Jay (Shalegeo) and others have pointed out, LOC (up until July 2008) was willing to define and redefine intervals in the HS areas to include both shale and nonshale intervals (leaving another traditional method of restricting the defined strata in a lease (using the LOC definitions) inadequate. As the area becomes more developed at the HS zone, there will be more reference wells to use to define the strata as has been stated by you, and as contemplated by (1), and less and less reason for l/o's to use method (2).

Unfortunately, the lessee need not tip his hand as to his true interest(s) in acquiring the lease, especially if the l/o (or mineral owner) is more than willing to sign a lease with strata definitions which the operator can exploit, or can (or could) readily redefine the terms with a petition and subsequent field order from LOC. Thus, if XYZ had taken leases that was restricted (surface to base of the Cotton Valley {per LOC}), XYZ could just petition LOC for a redefinition of the Cotton Valley down to the top of the Smackover in the absence of oppostion, obtain a field order, and, voila, XYZ now has HS leasehold. The point here was to address the problem prior to the operator prepping its pad and bringing in the 10000# BOPs, after which time the leases have long since been signed, and while now the real target of operations is now known, there's not much the lessor can do.

As you well know, Jim, unless the terms are illegal or in some other way adjudged unenforceable, the contract is the law between the parties. The restraints on all other standards of conduct or operations of lessee not reduced to writing are left to defined by the Mineral Code, LOC regulations and orders, general industry practice, 'reasonable and prudent operator' tests, and judicial determination. In the 'landman's utopia' that you cite elsewhere on this site, the resident attorneys know this, which is the reason that the standard utopian's lease rider is now six (6) pages long, and becoming more stringent and sophisticated all the time. It changes based upon the stated target and proposed operations; it even changes based upon the identity of the lessee. There is a provision of that rider that covers virtually every phase of operations, defines terms and conditions of every payment due, pooling and unitization, financial responsibilities of the operator, etc. So while the strata definition may look like one similar to what you propose, the rider has other provisions to prevent the operator taking advantage of the situation in other ways as the lease is maintained, developed, and held by operations and production.

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Permalink Reply by The_Baron on December 17, 2008 at 5:42

I doubt KB will believe you jim.

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Permalink Reply by The_Baron on December 17, 2008 at 16:17

Am i incorrect?

If so I will appologize. If I am correct, I stand by my statement.

Permalink Reply by Two Dogs, Pirate on December 17, 2008 at 16:40

My Mamma always told me to not play with matches but I always did.

Permalink Reply by The_Baron on December 17, 2008 at 17:24

Matches are fun......Ouch!!!!...stupid flames....

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